Harford County v. Maryland Reclamation Associates: A $45 Million Lesson on the Running of Statutes of Limitation

By Alan B. Sternstein

Maryland Reclamation Associates (“MRA”) purchased 62 acres of land in Harford County, with the intention of constructing and operating a rubble landfill on the parcel. Harford County thereafter enacted a series of zoning ordinances and made administrative rulings singularly aimed at precluding the parcel’s use for that purpose. The administrative and judicial review proceedings the controversy engendered have lasted some 20 years, so far, and have included four appeals to the Court of Appeals. In MRA’s last administrative effort to save its plans from the dumps, the Harford County Board of Appeals (“Board of Appeals”) affirmed a lower level administrative ruling denying MRA’s request for variances from the ordinances that would have permitted the landfill. The Board of Appeals did so by a unanimous board vote on June 5, 2007. In the Court of Appeals’ fourth decision, on March 11, 2010, the court affirmed the Board’s denial. Maryland Reclamation Assocs. v. Harford C’ty, 414 Md. 1, 994 A.2d 842 (2010) (“MRA IV”).

On February 19, 2013, MRA filed an action in the Circuit Court for Harford County, alleging that the County’s actions constituted a regulatory taking, in violation of the Maryland Constitution and the Maryland Declaration of Rights. The Circuit Court declined to dismiss the action as time barred pursuant to Maryland’s three-year general statute of limitations for civil actions. Md. Code Ann., Cts. & Jud. Proc. § 5-101. After a jury trial, the Circuit Court entered judgment for MRA in the amount of $45,420,076, in April 2018. The Court of Special Appeals, in Harford C’ty v. Maryland Reclamation Assocs., No. 788, September Term, 2018 (Md. App. decided Aug. 1, 2019) (“MRA V”), vacated MRA’s judgment and remanded the case for entry of judgment in the County’s favor. According to the court, “as a matter of law,” MRA’s takings claim accrued in 2007, when the Board of Appeals denied MRA’s variance requests and, accordingly, the claim was time-barred. MRA V, slip op. at 4.[1]

The biggest takeaways from MRA V, other than the taking away of MRA’s judgment, may not particularly new but are somewhat clouded, if not much undermined, by the court’s opinion, which actually first endorses and then rejects MRA’s own fatal misapprehension about the operation of statutes of limitation in land use cases. In particular, depending on the circumstances, the determination of when a cause of action accrues under such statutes may be more normative than it is empirical; that is, rather than controlled by a plaintiff’s not unreasonable impression, under the facts, when one is irremediably injured, the law, as established in judicial decisions or an applicable statute itself, determines when a cause of action accrues. More particularly, the normative rule, not an empirical test which the court itself states, controls.

In relating, as an initial matter, the basic principles regarding the accrual of causes of action, the opinion of the Court of Special Appeals actually lays some significant ground for affirming MRA’s judgment, either under or, arguably, notwithstanding the applicable statute of limitation. The court first sets forth, in its words, the “well established” rationale for statutes of limitation:

The adoption of statutes of limitation reflects a policy decision regarding what constitutes an adequate period of time for a person of reasonable diligence to pursue a claim. Such statutes are designed to balance the competing interests of each of the potential parties as well as the societal interests involved. Thus, one of the purposes of such statutes is to assure fairness to a potential defendant by providing a certain degree of repose. This is accomplished by encouraging promptness in prosecuting actions; suppressing stale or fraudulent claims; avoiding inconvenience that may stem from delay, such as loss of evidence, fading of memories, and disappearance of witnesses; and providing the ability to plan for the future without the uncertainty inherent in potential liability. Another basic purpose is to prevent unfairness to potential plaintiffs exercising reasonable diligence in pursuing a claim. Still another purpose is to promote judicial economy.

MRA V, slip op. at 19-20 (quoting Poole v. Coakley & Williams Constr., Inc., 423 Md. 91, 130-31, 31 A.3d 212, 235-36 (2011) (quoting Pierce v. Johns-Manville Sales Corp., 296 Md. 656, 665, 464 A.2d 1020, 1026 (1983))) (emphasis added). The court then sets forth the also well established principle that “[a]n inverse condemnation claim ‘accrues when the affected party knew or should have known of the unlawful action and its probable effect.’” MVA V, slip op. at 20 (quoting Duke St. Ltd. P’ship v. City Comm’rs, 112 Md. App. 37, 49, 684 A.2d 40, 46 (1996) (quoting Millison v. Wilzack, 77 Md. App. 676, 685-86, 551 A.2d 899, 903 (1989))) (emphasis added).

Under these settled legal views, it is at least arguable that MRA’s claim did not accrue until the Court of Appeals decision in MRA IV, at which time the legal status of the proposed landfill became a certainty, because MRA was then without any legal recourse whatsoever to change that status. That is to say, there was then no probability whatsoever that the administrative actions were unlawful and that MRA’s property was entitled to a variance. At that time, MRA had no realistic chance of constructing and operating its proposed landfill. Prior to the decision in MRA IV, MRA did not know the “probable effect” of the Board of Appeals’ action. To be sure, it did have reason to believe that the Board of Appeals’ action was unlawful, but that is precisely why MRA did not know the “probable effect” of that action until the MRA IV decision.

In this regard, it is significant that, in earlier civil actions, MRA had also sought to have the County’s zoning ordinances and their application to MRA invalidated. The action brought in 1991 resulted in the Court of Appeals’ decision in Maryland Reclamation Assocs. v. Harford C’ty, 342 Md. 476, 677 A.2d 567 (1996) (“MRA II”).[2] There, the Court of Appeals ruled that before MRA could challenge the validity of the County’s ordinances, MRA was required to exhaust its remedies, by appealing lower agency rulings to the Board of Appeals and by applying for variances from the County’s ordinances.

After MRA II, MRA initiated further administrative proceedings, including seeking variances which were denied, and then filed another civil action, challenging the County’s denial. The result was the Court of Appeals’ decision in Maryland Reclamation Assocs. v. Harford C’ty, 382 Md. 348, 855 A.2d 351 (2004) (“MRA III”), in which the Court of Appeals ruled that MRA had not exhausted its administrative remedies because it had not appealed the county’s denial to the County’s Board of Appeals. Presumably, in again requiring exhaustion, the Court of Appeals had no reason to believe that the variance denial was plainly lawful and did not believe it was sending MRA on a fool’s errand, by requiring resort further to the Board of Appeals. Put otherwise, even when the county first denied variances, MRA had reason to continue to believe, based on the Court of Appeals’ own actions, that the county’s actions remained unlawful with respect to administrative law and that, therefore, there were no grounds for then contending that the actions were, at that time, a taking.

In effect, the Court of Appeals itself had primed MRA to be vigilant and certain that it had, in fact, exhausted administrative remedies before bringing any further civil action to remedy application of the county’s zoning ordinances to it or the county’s variance denials. It would have been reasonable for MRA to believe that this was what it was doing when, after the Board of Appeals affirmed the denial of variances in June of 2007 and before bringing yet a third civil action of any sort, it pursued matters through again to the Court of Appeals, which affirmed the Board of Appeals in MRA IV in 2010. Only when the Court of Appeals affirmed the Board of Appeals in MRA IV, did MRA (i) know that the county’s actions were no longer subject to legal recourse with respect to administrative law and the legal status of its property (that is, not subject to variances) fixed, (ii) have reason to believe that the county’s actions were a taking, and (iii) know that the “probable effect” of the county’s administrative actions was that its landfill would never be constructed and operated, short of the highly unlikely prospects of not only getting the Supreme Court to review MRA IV but also prevailing in the Supreme Court.

The Court of Appeals has observed that “the determination of when a cause of action accrues is properly made with reference to the rationale underlying statutes of limitation.” Pierce, 296 Md. at 665, 464 A.2d at 1025. It is significant, therefore, that should the Court of Special Appeals in MRA V have ruled that the statute of limitation, as applicable to a land use takings action, did not begin to run until the Court of Appeals decision in MRA IV, there would not have been any lack of fealty to the “well established” rationale for statutes of limitation, as the court itself stated that rationale. Nor does the court’s opinion essay any discussion otherwise.

Specifically, after 20 years of legislative, administrative and judicial proceedings, the causes for which the county shared at least equally with MRA, contentions that the interest in repose would have been compromised by a ruling that would have allowed MRA to bring its action in 2013, instead of only until 2010, seem overstated, particularly given that the period from 2010 to 2013 was itself substantially occupied with proceedings involving the dispute between MRA and the county. This was not a situation where the plaintiff surprisingly acted after a dispute had been dormant for several years. Nor can MRA be faulted for not having diligently and doggedly pursued its interests. It did. Likewise, given the virtually continuous and contentious activity between the parties since MRA advised of its plans to construct and operate a landfill, including comprehensive evidence obtained and of record in both judicial and administrative proceedings, inconveniences such as loss of evidence or faded memories cannot be a concern. Finally, given that MRA’s efforts were always to avoid the need for an inverse condemnation action, it would be perverse and hardly “prevent[ing] unfairness” to hold MRA accountable for its failure to bring an inverse condemnation proceeding promptly when its efforts to challenge not just administrative but also legislative action targeted entirely against MRA failed, while its judicial review efforts had not.[3]

The Court of Appeals decision is not just at odds with the rationale for statutes of limitation. After laying down the standard that “[a]n inverse condemnation claim ‘accrues when the affected party knew or should have known of the unlawful action and its probable effect,’” the Court of Special Appeals, nevertheless, does not actually apply a standard of “probable effect” in its analysis of when MRA’s taking claim accrued. Instead, the court analyzes whether the county’s administrative actions were final for purposes of judicial review, not final for purposes of determining whether its actions meant that their “probable effect” was a taking of MRA’s property.[4] Because the analysis of when action is suitable for judicial review (when the agency has had its complete say on a matter) is not the same as the analysis of when the probable effect of an action results in a judicially remediable injury (when agency action inalterably and adversely changes legal status or results in some sort of palpable injury to person or property), an action being final for purposes of judicial review is a category different from when an action is the taking of or injury to some interest.

The Court of Special Appeals’ opinion cites several cases that exemplify this difference. See, e.g., United States v. Dickinson, 331 U.S. 745, 746-49 (1947) (taking occurred not when government constructed dam, though effects were then foreseeable, but when rising river level eventually flooded plaintiff’s property); Boling v. United States, 220 F.3d 1365, 1370-71 (Fed. Cir. 2000) (cause of action accrues when it “becomes clear that the gradual process set into motion by the government has effected a permanent taking …. Thus, during the time when it is uncertain whether the gradual process will result in a permanent taking, the plaintiff need not sue, but once it is clear that the process has resulted in a permanent taking and the extent of the damage is reasonably foreseeable, the claim accrues and the statute of limitations begins to run.”); see also Litz v. Dep’t of Env’t, 434 Md. 623, 653-55, 76 A.3d 1076, 1093-95 (2013) (taking sufficient for an inverse condemnation action accrued not when town failed to comply with consent decree to abate pollution but when town’s sewage eventually contaminated lake, resulting in foreclosure on plaintiff’s lake front property). In these cases, agency action that was final for purposes of judicial review did not result in a taking until conduct that the agency action authorized or implemented resulted in physical damage to property to such an extent as to be tantamount to a taking.

A reasonable application of the “probable effect” standard would allow that where an agency action, final for purposes of judicial review, is, within reason, arguably contrary to law, a putative plaintiff may properly believe that the effect of that action may well be inconsequential, not probable, given the reasonable likelihood that the action will be invalidated upon judicial review. Accordingly, a cause of action would not accrue, if at all, until, upon judicial review, the action is affirmed, possibly quite unexpectedly. In MRA’s case, more particularly, were the Board of Appeals 2007 determination of the legal status of MRA’s property reasonably believed to have been wrong, it could not be said that the “probable effects” of the decision would be a taking, for MRA could appropriately have anticipated that the Board’s decision would be invalidated upon judicial review. Accordingly, an MRA cause of action for inverse condemnation would not accrue, if at all, until the Board’s decision were affirmed. In short, despite the accrual standard on which the Court of Special Appeals initially embarked in its MRA V opinion, the standard that the court actually applied for inverse condemnation actions, is more formal than practical; that is, a taking occurs and a claim therefor accrues when some statute or the clear weight of applicable judicial precedent specifies when a cause of action has accrued, not when a putative plaintiff should apprehend that the probable effect of an action will be injury to person or property or an inalterable and adverse change in legal status.

What ultimately drove the decision of the Court of Appeals in MRA V, of course, was not knowledge, imputed to MRA, of 20 years of convoluted proceedings or even knowledge of the probable effect of the decision of the Howard County Board of Appeals. The court, for example, made no assessment, of which it believed MRA also should have known, whether the Board’s decision was on solid ground or subject to substantial question, not meriting or meriting further judicial challenge, before the final fate of MRA’s landfill could be known. Instead, according to the court, there were Maryland precedents that it believes should have put MRA’s counsel on at least notice that the statute of limitation for inverse condemnation based on an administrative determination of property rights and privileges could have been construed to run from when the determination is final for purpose of judicial review (not because there was a determination of legal status that was, in fact, also final, much less a case making that specific construction). See MRA V, slip op. at 23-26.

Those Maryland precedents do suggest that a taking has occurred when legal status has been determined administratively, but not because of the probable ultimate effect of the determination in circumstances where the ultimate determination of legal status remains subject further to judicial review or further to appeal. Those decisions are, moreover, distinguishable from MRA’s plight, for something more than a mere determination of legal status had occurred at the point the courts held that the statute of limitation had begun to run. In, for example, Arroyo v. Board of Education, 381 Md. 646, 851 A.2d 576 (2004), the plaintiff had, in fact, been terminated and was unemployed by the time administrative proceedings had become final for purposes of judicial review. Likewise, in Watson v. Dorsey, 265 Md. 509, 290 A.2d 530 (1972), the conduct constituting counsel’s malpractice had occurred by the conclusion of the trial in which the conduct had occurred, the point at which it was held the statute began to run. The decision in Edwards v. Demedis, 118 Md. App. 541, 703 A.2d 240 (1997), is of the same ilk. There, the conduct constituting malpractice had already occurred by the time plaintiffs acted on it.[5] In MRA V, by contrast, final agency action had determined merely an abstraction, that is, a legal classification or relationship that remained subject to redetermination on judicial review.

At the same time the court relies on these cases, it relegates to a footnote Heron v. Strader, 361 Md. 258, 761 A.2d 56 (2000), the Court of Appeals decision that is more on point. There the court held that a malicious prosecution claim does not accrue until the legal status of the defendant (liable or not liable, guilty or not guilty) has been finally determined on appeal in the underlying action. That status cannot be known and the probable effect of the underlying action having been brought cannot be known until appeals have been exhausted. Likewise, MRA could not know the probable effect of the initial denial of variances until the legal status of its property (whether or not it was entitled to a variance) was known. Again, presumably, the Court of Appeals, in MRA III, required MRA to appeal to the Board of Appeals and, in MRA IV, entertained plenarily the appeal there because there was potential merit to MRA’s position as to the legal status of its property ultimately.

The Court of Special Appeals holds, therefore, that where administrative action inalterably determines, with respect to and only to administrative proceedings, legal rights and privileges on which the value of property is dependent (as opposed to a situation where the administrative action is one of physical effect on property and, thereby, its value), it is deemed, as a matter of law, that a taking has occurred. This is regardless of the fact that, in likely many cases, the actual legal status of property cannot be known until judicial review of the administrative action has been completed. Nor, therefore, can the “probable effect” of the administrative action be known until then.

The threefold lesson here is neither profound nor new, though, undoubtedly, it has been uncommonly expensive, to the tune of $45,420,076. First, in considering or engaging in any legal process, a lay person should promptly proceed with the advice and assistance of legal counsel. Second, counsel considering the institution of legal proceedings or engaged in such proceedings should be unfailingly vigilant of statutes of limitation that those proceedings affect or implicate and the law or unsettled questions of law addressing when they begin to run, filing a protective civil action in any circumstance of uncertainty. Finally, appellate courts must constantly endeavor to be not just clear and precise in the rulings they make but also intellectually rigorous and disciplined in the relationship between those rulings and the rationales put forth to support them, in order to avoid, as much as is reasonably possible, room for error by counsel or lower courts.

[1] Before its ruling under the applicable statute of limitation, the Court of Appeals first ruled that MRA had exhausted the administrative remedies that it was necessary to exhaust before it brought a takings claim or other state or federal constitutional challenge to Harford County’s zoning ordinances and denial of variances from those ordinances. In particular, MRA was not required to bring its taking or any constitutional claim in an administrative proceeding. Instead, its administrative remedies were exhausted once the Board of Appeals affirmed decisions to deny MRA the variances it needed to construct and operate its landfill. MRA V, slip op. at 16-19.

[2] The appeal to the Court of Appeals of MRA’s first action challenging Harford County was eventually dismissed by the court for want of jurisdiction, without affirming or reversing the Court of Special Appeals below. Holmes v. Md. Reclamation Assocs., 90 Md. App. 120, 600 A.2d 864, cert. dismissed sub nom. Harford C’ty v. Md. Reclamation Assocs., 328 Md. 229, 614 A.2d 78 (1992) (“MRA I”).

[3] At least arguably, the facts in MRA V suggest application of the doctrine of equitable tolling. “[E]quitable tolling seeks to excuse untimely filing by an individual plaintiff and is generally applicable where the plaintiff has been induced or tricked by the defendant’s conduct into allowing the filing deadline to pass.” Adedje v. Westat, Inc., 214 Md. App. 1, 13, 75 A.3d 401, 408 (2013) (citation omitted) (emphasis in original). “The purpose of equitable tolling ‘is to toll the statute of limitations in favor of a plaintiff who acted in good faith where the defendant is not prejudiced by having to defend against a second action.'” Id. “We have generally been much less forgiving in receiving late filings where the claimant failed to exercise due diligence in preserving his legal rights.” Nixon v. State, 96 Md. App. 485, 502, 625 A.2d 404, 412 (1993) (emphasis added).

[4] Indeed, the authority the court cites (MRA V, slip op. at 23) for its claim that the County’s actions were final, Shaarei Tfiloh Congregation v. Mayor of Baltimore, 237 Md. App. 102, 183 A.3d 835 (2018), addressed when administrative action is final and, therefore, justiciable or ripe for judicial review. Nor was the running of any statute of limitations at issue in the case.

[5] It should also be noted that in the Supreme Court case on which the Court of Appeals also relies for its ruling (MRA V, slip op. at 21-22 & n.7), Williamson C’ty Regional Planning Comm’n v. Hamilton Bank, 473 U.S. 172 (1985), expressly assumes, for the sake of discussion, but does not decide that administrative regulation may effect a taking and, moreover, does not address the question addressed in MRA V, which is when one should know that a taking has been effected, whether, that is, one should know when an inverse taking by an administrative determination becomes actionable for purposes of the running of the applicable statute of limitation.